Restructuring to simplify the complexity

After buying 50 marketing services companies here and overseas over the past decade,
Photon Group
has been forced to toss aside its chequebook and focus on sweating its assets.

The earnings downgrade, write-downs and restructuring that chief executive Jeremy Philips revealed yesterday – and the $200 million capital raising that will be conducted over the next few weeks – are designed to clean up Photon’s messy accounts, repair its balance sheet, restore investor confidence and force the companies in the group to share resources and clients. “Photon was complex to manage and complex for investors to understand," Mr Philips said.

“It needed to be simplified."

“Complex" is an understatement. Photon was an unwieldy collection of businesses, with duplication in back-office areas and little sharing of clients.

The few times Photon companies did work together on clients were accidental or driven by the clients.

Mr Philips, who worked in the office of News Corp chairman and chief executive Rupert Murdoch until late March, has set up three new divisions: Australian agencies, Australian retail “field" marketing and international. The heads of the divisions would be announced in the next few weeks.

Industry sources said Matthew Melhuish, executive chairman of Photon’s ad agency BMF, would run the Australian agencies division. That would be a wise move: Mr Melhuish is smart, tough and one of the best local advertising executives.

“The next phase of Photon is an operational task, that is, capturing the strategic benefits of the group," Mr Philips said, adding that he wanted to transform Photon from a holding company to an operating company.

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Mr Melhuish and the other divisional heads will be charged with setting up systems for the Photon companies to work more closely together.

It will not be an easy job. Rival marketing services firm STW Communications Group has spent years working on systems to generate client referrals across the 70 or so companies it owns, and has only seen real benefits in the past two or three years.